Transfer Pricing Uncertain Tax Positions: Learning the New Math

Two recent changes in the US transfer pricing enforcement environment could change how entities evaluate their transfer pricing-related tax positions. First, the Internal Revenue Service (IRS) has achieved a dramatic increase in transfer pricing litigation success. Second, the IRS has been messaging that it intends to assert transfer pricing penalties in more cases, including in situations where transfer pricing documentation exists, if that documentation is found to be insufficient.

Since 2006, the Financial Accounting Standard Board (“FASB”) has specifically controlled how companies identify, measure, and report uncertain tax positions (“UTPs”) on their US Generally Accepted Accounting Principles (“GAAP”) financial statements. ...